Government does not have the capacity to run a state bank

The problem with a Gauteng state bank is the same as the problem the country has with the state bank the ANC wants to turn the Postbank into: the people it will be aimed at will not be able to pay back the money they borrow and it will also not help unbanked people to get access to banking services.

Gauteng finance MEC Jacob Mamabolo recently said the due diligence to establish a state bank in Gauteng has been completed and complies with legislation.

He said the state bank will play a crucial role in supporting small, medium and micro enterprises (SMMEs) and unserved individuals in the formal financial sector.

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State banks are financial institutions commissioned by the state to provide commercial banking services, according to Investopedia, but state banks are not responsible for monetary policy and are restricted to providing banking services. Monetary policy is the domain of the central bank.

The move to establish a state bank for Gauteng comes after Khumbudzo Ntshavheni, then still minister of communications and digital technologies, said in January that Postbank is ready to take up the role of a state bank with 100 new branches and revamped infrastructure to operate a fully fledged bank.

There are already many financial institutions for small business development that already struggle and often need bailouts because the lenders do not pay back the money they borrowed.

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Independent economist professor Bonke Dumisa also points out that many black people do not have collateral for a loan because they do not own land. Was a problem identified that shows that we need a state bank?

We know about the large group of unbanked people who cannot afford a bank account, but they will also not be able to pay back the money.

Will government ever learn from its mistakes? It does not have the capacity to run a state bank. Lending to people with low incomes is very high-risk and interest rates will have to be massive to mitigate this risk.

This whole idea of a state bank for the country or just for Gauteng seems to be part of the electioneering that the ANC is starting: to say this is what we have done, even if it does not work. It falls into the same category as land redistribution, water licences and, of course, National Health Insurance.

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It has not been implemented, but who cares if it does not work? It looks good on paper.

It is also a sign that members of the ruling party all just jump in and do their own thing without checking first: Finance Minister Enoch Godongwana said last year the creation of a new state bank was impossible, as the country simply cannot afford it.

About the Postbank plan, Godongwana said it already accepts deposits and if another lender is established, it will have to be self-funded.

Last weekend, it seemed that the ANC thinks it can issue a decree, such as “engaging” with the Reserve Bank about increasing interest rates, to make things happen that make the party look good.

Godongwana, luckily, shut that down very fast, putting ANC secretary-general Fikile Mbalula straight about the independence of the central bank.

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